Market Analysis: CDW And Competitors In Electronic Equipment, Instruments & Components Industry

In today's fast-paced and competitive business landscape, it is essential for investors and industry enthusiasts to thoroughly analyze companies before making investment decisions. In this article, we will conduct a comprehensive industry comparison, evaluating CDW CDW against its key competitors in the Electronic Equipment, Instruments & Components industry. By examining key financial metrics, market position, and growth prospects, we aim to provide valuable insights for investors and shed light on company's performance within the industry.

CDW Background

CDW Corp is a value-added reseller operating in the U.S. (95% of sales) and Canada (5%). The company has more than 100,000 products on its line of cards that range from notebooks to data center software. Roughly half of CDW's revenue comes from midsize and large businesses, with the remaining from small businesses, government agencies, education institutions, and health-care organizations.

After a detailed analysis of CDW, the following trends become apparent:

• The Price to Earnings ratio of 27.55 for this company is 1.85x above the industry average, indicating a premium valuation associated with the stock.

• It could be trading at a premium in relation to its book value, as indicated by its Price to Book ratio of 16.33 which exceeds the industry average by 8.46x.

• The stock's relatively high Price to Sales ratio of 1.38, surpassing the industry average by 2.76x, may indicate an aspect of overvaluation in terms of sales performance.

• The Return on Equity (ROE) of 18.43% is 15.5% above the industry average, highlighting efficient use of equity to generate profits.

• The company has higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $540 Million, which is 3.6x above the industry average, indicating stronger profitability and robust cash flow generation.

• The company has higher gross profit of $1.23 Billion, which indicates 3.15x above the industry average, indicating stronger profitability and higher earnings from its core operations.

• With a revenue growth of -9.45%, which is much lower than the industry average of -6.39%, the company is experiencing a notable slowdown in sales expansion.

Debt To Equity Ratio

The debt-to-equity (D/E) ratio is a measure that indicates the level of debt a company has taken on relative to the value of its assets net of liabilities.

Considering the debt-to-equity ratio in industry comparisons allows for a concise evaluation of a company's financial health and risk profile, aiding in informed decision-making.

In terms of the Debt-to-Equity ratio, CDW can be assessed by comparing it to its top 4 peers, resulting in the following observations:

• Compared to its top 4 peers, CDW has a higher debt-to-equity ratio of 3.24, indicating a higher level of debt financing.

• This higher debt proportion can expose the company to increased financial risk and potential challenges.

Key Takeaways

CDW's high PE, PB, and PS ratios suggest that the company is trading at a premium compared to its peers in the Electronic Equipment, Instruments & Components industry. This indicates that investors are willing to pay a higher price for CDW's earnings, book value, and sales. On the other hand, CDW's high ROE, EBITDA, gross profit, and low revenue growth indicate that the company is generating strong profitability and efficiency, but experiencing slower revenue growth compared to its industry peers.

This article was generated by Benzinga's automated content engine and reviewed by an editor.